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If you're one of the many who have t federal student loans, there's good news: the Education Department has finally launched an application that lets borrowers separate t consolidation loans, which could open doors to student loan forgiveness programs. After years of waiting, the new application allows those with t loans, often married borrowers, to split their balances and take a clearer path to managing debt independently - a long-overdue relief.
t consolidation loans, also known as spousal consolidation loans, were offered to married couples until 2006, allowing them to combine individual student loan balances into one. While the intent was to make payments easier to manage, it created unique complications. For instance, if the couple divorced, both individuals were still on the hook for the total balance.
As the Education Department explains, borrowers had "no ability to separate the loans, even after a divorce." This rule also meant payments in income-driven repayment plans were based on both spouses' incomes, which could become burdensome, especially if either ex-spouse had remarried.
In 2022, Congress stepped in with the t Consolidation Loan Separation Act (JCLSA), which allowed borrowers to finally separate t loans. However, it's taken until this fall for the Education Department to set up a process.
Breaking down the steps to apply for t student loan forgiveness
This new application is a big step for borrowers who have waited years, hoping to qualify for programs like Public Service Loan Forgiveness (PSLF) and the new SAVE plan but who found their t loans were ineligible due to rigid policies. As one recent Department bulletin put it, the new form is "a able paper application" - called the Combined Application to Separate a t Consolidation Loan and Direct Consolidation Loan Promissory Note - that borrowers can now use to kickstart the process.
The good news for borrowers who qualify for this separation is that even though deadlines for some loan forgiveness initiatives have ed, they may still be able to benefit. For instance, those who separate their t consolidation loans will receive a one-time IDR adjustment, a retroactive credit that can count toward PSLF forgiveness if they meet eligibility requirements.
The department also noted, "Federal Family Education Loan (FFEL) Program t Consolidation Loan borrowers...will receive the benefit of the one-time IDR adjustment," even if they submit their application after the adjustment's 2024 implementation.
Applying is straightforward but has a few steps. Borrowers can submit a t application if both agree, or a separate one if they've experienced situations like domestic violence, economic abuse, or lack of access to the other co-borrower's loan information. Once the application is submitted, it will be reviewed within ten business days. The Department will then separate the loans into individual Direct Consolidation Loans, at which point borrowers can start pursuing student loan forgiveness paths, including PSLF or income-driven repayment options.